ASST CIT 8(2)(2), MUMBAI V. STARFLEX SEALING INDIA P.LTD, MUMBAI

ITA 5387/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0220 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 43B; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 5387/MUM/2016 (ASSESSMENT YEAR: 2011-12) A C I T - 8(2)(2) ROOM NO. 624, AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400020 VS. M/S. STARFLEX SEALING INDIA P. LTD. 124, NAGDEVI STREET MUMBAI 400 003 PAN AAACN1679B APPELLANT RESPONDENT APPELLANT BY: SHRI V. VIDHYADHAR RESPONDENT BY: SHRI SUNIL HIRAWAT DATE OF HEARING: 19.02.2018 DATE OF PRONOUNCEMENT: 21.02.2018 O R D E R PER C.N. PRASAD, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-14, MUMBAI DATED 27.06.2016 FOR A.Y. 2011-12 . 2. THE FIRST GROUND OF APPEAL RAISED BY REVENUE IS TH AT THE CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE UNDER SECTION 43B OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) IN RESPECT OF PA YMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESIC. 3. THE AO, WHILE COMPLETING THE ASSESSMENT, DISALLOWE D THE PF CONTRIBUTION AND ESIC IN RESPECT OF EMPLOYEES IN VI EW OF THE PROVISIONS OF SECTION 2(24)(X) R.W.S. 36(1)(VA) OF THE ACT FOR TH E REASON THAT THESE AMOUNTS WERE REMITTED BY THE ASSESSEE BEYOND THE DU E DATE SPECIFIED IN THE RESPECTIVE ACTS. IT WAS CONTENDED BEFORE THE AO THAT SINCE THESE PAYMENTS WERE MADE WITHIN THE DUE DATE FOR FILING R ETURN OF INCOME NO DISALLOWANCE IS REQUIRED TO BE MADE. HOWEVER, THE A O DID NOT AGREE WITH ITA NO. 5387/MUM/2016 M/S. STARFLEX SEALING INDIA P. LTD. 2 THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE S AME UNDER SECTION 43B OF THE ACT. 4. ON APPEAL, THE CIT(A), FOLLOWING THE DECISION OF T HE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GH ATGE PATIL TRANSPORT LTD. 368 ITR 749, DELETED THE DISALLOWANCE. 5. THE LEARNED D.R., ON THE OTHER HAND, VEHEMENTLY SUP PORTED THE ORDER OF THE ASSESSING OFFICER. 6. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANC E ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT. THE LEARN ED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN ITS FAVOUR BY THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2009-10 IN CROSS OBJECTION NO. 223/MUM/2014 DATED 08.06.2015 FOLLOWI NG THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT GHATGE PATIL TRANSPORT LTD. (SUPRA). 7. ON HEARING BOTH THE PARTIES WE FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE JUR ISDICTIONAL HIGH COURT GHATGE PATIL TRANSPORT LTD. (SUPRA) WHEREIN THE HON 'BLE HIGH COURT HELD AS UNDER: - THE QUESTION ARISING, THEREFORE, IS (A) WHETHER TH E TRIBUNAL WAS RIGHT IN IGNORING THE DISTINCTION BETWEEN THE EMPLOYEES CONTRIBUTION AND EMPLOYERS CONTRIBUTION AND WHETHER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS PVT. LTD. REPORTED IN (2009) 319 ITR 306 (SC) WOULD APPLY ONLY IN THE CASES OF THE EMPLOYEES CONTRIBUTION; AND (B) WHETHER THE TRIBUN AL WAS RIGHT IN HOLDING THAT THE PAYMENT OF THE EMPLOYEES CONTRIBU TION IS SUBJECT TO THE PROVISIONS OF SECTION 43B WOULD LEAD TO THE INC LUSION OF THE EMPLOYERS CONTRIBUTION AS WELL. RESPECTFULLY FOLLOWING THE SAID DECISION WE UPHOLD THE ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE MADE TOWARDS EM PLOYEES PF CONTRIBUTION AND ESIC. THUS, THE GROUND IS DISMISSE D. 8. THE NEXT GROUND RAISED BY THE REVENUE IS IN RESPEC T OF ALLOWING SET OFF OF BROUGHT FORWARD DEPRECIATION FOR A.Y. 2001-0 2 BEYOND EIGHT ASSESSMENT YEARS. ITA NO. 5387/MUM/2016 M/S. STARFLEX SEALING INDIA P. LTD. 3 9. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY THE DECI SION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS PV T. LTD. 257 CTR 123 AND FOLLOWING THE DECISION THE COORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 5354/MUM/2013 DATED 08.06.2015 FOR A.Y. 200 9-10 ALLOWED SET OFF UNABSORBED DEPRECIATION PERTAINING TO A.Y. 2000 -01. 10. THE LEARNED D.R., ON THE OTHER HAND, VEHEMENTLY SUP PORTED THE ORDER OF THE ASSESSING OFFICER. 11. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDE RS OF THE AUTHORITIES BELOW AND THE DECISION IN ASSESSEES ON CASE FOR A.Y. 2009-10. ON PERUSAL OF THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CASE WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIB UNAL IN A.Y. 2009-10 AND THE COORDINATE BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: - 3. IN APPEAL, THE CIT(A) ALLOWED THE SET OFF OF UNA BSORBED DEPRECIATION PERTAINING TO A.Y.2000-01 AFTER HAVING THE FOLLOWIN G OBSERVATIONS :- 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. THERE WAS AMENDMENT IN SECTION 32(2) OF THE ACT W.E.F.1-4-200 2. AS PER UNAMENDED PROVISIONS THE UNABSORBED DEPRECIATION OF EARLIER YEARS COULD BE CARRIED FORWARD TO A MAXIMUM OF EIGHT ASSE SSMENT YEARS AND SET OFF AGAINST INCOME OF THOSE EIGHT ASSESSMEN T YEARS. AFTER LAPSE OF EIGHT ASSESSMENT YEARS, NO CARRY FORWARD A ND SET OFF WAS ALLOWED. HOWEVER, AFTER AMENDMENT THIS CONDITION OF EIGHT ASSESSMENT YEARS HAS BEEN REMOVED AND UNABSORBED DE PRECIATION IS REQUIRED TO BE CONSIDERED AS PART OF NEXT / SUBSEQU ENT ASSESSMENT YEARS, DEPRECIATION AND ALLOWED AS SUCH. IF THERE I S NO SUCH INCOME FOR ADJUSTMENT OF SUCH UNABSORBED DEPRECIATION, SUC H UNABSORBED DEPRECIATION HAS BEEN ALLOWED TO BE CARRIED FORWARD FOR SUBSEQUENT ASSESSMENT YEARS WITHOUT ANY RESTRICTIONS OF ANY YE ARS. THE DISPUTE WAS AS TO WHETHER OR NOT THE UNABSORBED DEPRECIATIO N OF ASSESSMENT YEARS PRIOR TO AY 2000-01 IS ALLOWED TO BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME OF SUBSEQUENT YEARS IN VIEW OF A MENDMENT MADE IN SECTION 32 OF THE ACT. THIS DISPUTE AROSE IN VAR IOUS CASES. THE ITAT SPECIAL BENCH MUMBAI IN-THE CASE OF M/ S. TIMES GUA RANTY LTD. DISCUSSED THIS ISSUE AND DIVIDED THE UNABSORBED DEP RECIATION IN THREE PARTS I.E. (I) UNABSORBED DEPRECIATION PERTAINING TO THE ASSESSMEN T YEAR UP TO AY 1996-97; ITA NO. 5387/MUM/2016 M/S. STARFLEX SEALING INDIA P. LTD. 4 (II) PERTAINING TO ASSESSMENT YEAR 1997-98 TO AY 2001-02 & (III) DEPRECIATION PERTAINING TO ASSESSMENT YEAR FROM AY 2002-03 ONWARDS. THE SPECIAL BENCH HELD THAT THE UNABSORBED DEPRECIA TION FOR THE SECOND PERIOD I.E. FOR AY 1997-98 TO AY 2001-02 CAN BE CARRIED FORWARD AND SET OFF FOR A MAXIMUM PERIOD OF EIGHT A SSESSMENT YEARS AND SUBSEQUENTLY IT COULD NOT BE SET OFF AGAINST IN COME OTHER THAN BUSINESS INCOME. AS PER DECISION OF ITAT SPECIAL BENCH., MUMBAI IN THE CASE OF M/S. TIMES GUARANTY LTD., THE APPELLANT'S DEPRECIAT ION FOR AY 2000- 01 WAS NOT ALLOWABLE TO BE SET OFF AGAINST THE INCO ME OF YEAR UNDER CONSIDERATION. HOWEVER, THEREAFTER THE GUJARAT HIGH COURT IN THE CASE OF M/ S. GENERAL MOTORS INDIA PVT. LTD. 257 ITR 123 HAS HELD THAT.- 'I) AMENDMENT TO SEC.32(2) BY FINANCE ACT 2001 IS A PPLICABLE FROM A.Y.2002-03 AND SUBSEQUENT YEARS. THEREFORE, UNABSO RBED DEPRECIATION FROM A. Y 97-98 UPTO A. Y 2001 TO GOT CARRIED FORWARD TO THE A. Y.2002-03 AND BECOME PART THEREOF', II) IT CAME TO THE GOVERNED BY THE PROVISIONS OF S EC.32(2) AS AMENDED BY FINANCE ACT 2001 AND WAS AVAILABLE FOR CARRY FOR WARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMITS WHATSOEVER.' THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE C ASE OF GENERAL MOTORS P. LTD. IS SUBSEQUENT TO THE DECISION OF. IT AT SPECIAL BENCH, MUMBAI. HOWEVER, WHILE ADJUDICATING THE ISSUE, THE DECISION OF ITAT SPECIAL BENCH, MUMBAI HAS NOT BEEN CONSIDERED BY TH E GUJARAT HIGH COURT. HOWEVER, BEING A HIGHER JUDICIAL FORUM / AUT HORITY, THE DECISION OF GUJARAT HIGH COURT IS REQUIRED TO BE FOLLOWED. T HERE IS NO ANY CONTRARY DECISION OF ANY OTHER HIGH COURT ON THIS I SSUE. IN VIEW OF ABOVE AND FOLLOWING THE ABOVE DECISION O F GUJARAT HIGH COURT, THE AO IS DIRECTED TO ALLOW SET OFF OF UNABS ORBED DEPRECIATION OF ASSESSMENT YEAR 2000-01. THIS GROUND OF APPEAL IS THEREFORE, ALLOWED. AGAINST THIS ORDER OF CIT(A), THE REVENUE IS IN AP PEALS BEFORE US AGAINST ALLOWING SET OFF OF DEPRECIATION AND THE AS SESSEE IS IN CROSS OBJECTIONS AGAINST THE CONFIRMATION OF ADDITION SO MADE BY THE AO ON ACCOUNT OF ESIC CONTRIBUTION FOR THE ASSESSMENT YEA RS 2009-10 & 2010- 2011. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE TH ROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COU RT IN THE CASE OF M/S GENERAL MOTORS PVT. LTD., 257 CTR 123, BY RELYI NG ON WHICH ITA NO. 5387/MUM/2016 M/S. STARFLEX SEALING INDIA P. LTD. 5 CIT(A) HAS ALLOWED SETTING OFF OF DEPRECIATION. HEN CE, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, WE D ISMISS THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2009-2010. RESPECTFULLY FOLLOWING THE SAID DECISION WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND RAISED BY REVENUE ON THIS ISS UE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2018. SD/ - SD/ - (A.L. SAINI) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21 ST FEBRUARY, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -14, MUMBAI 4. THE CIT - 8, MUMBAI 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.